An annuity after divorce keeps paying as its contract says, but a court can share it, and a joint life annuity's survivor income depends on the wording.

Divorce does not cancel or rewrite an annuity by itself. What it changes is who has a claim on the money, and what a former spouse can expect if you die first. This guide covers UK pension annuities, England and Wales first and Scotland where it differs. Pension Wise, MoneyHelper's free guidance, is impartial and backed by government. Splitting an annuity between ex-partners is specialist work. Your ex-partner's claim and the settlement are for an FCA-authorised adviser to talk through. Begin with a few details; the form on this page takes them, then they phone you.

Does divorce put an annuity into the settlement?

It can be. The Matrimonial Causes Act 1973 lists "a retirement annuity contract" and "an annuity or insurance policy purchased, or transferred, for the purpose of giving effect to rights under an occupational pension scheme or a personal pension scheme" among the pension arrangements a court deals with. An annuity bought with pension savings therefore sits in the same category as a workplace or personal pension when the finances are divided.

That does not mean it must be split. MoneyHelper says you do not have to share your pensions when you separate and have no automatic right to claim some of your ex-partner's pension, but that they should be added to the calculations. If you cannot agree, a court can decide.

What a settlement cannot easily do is unpick the annuity itself. Aviva's key features say that once its annuity is set up you can't change it, cash it in or defer payments, "even if your personal circumstances change". Dividing the value therefore happens around the contract, using the methods below, and other insurers' terms will say whether they differ. For pensions generally, see pension on divorce.

Can a court share an annuity that is already paying?

MoneyHelper describes three routes: pension sharing, attachment (also called earmarking) and offsetting. Each reaches an annuity differently.

Sharing. A share moves from one person to the other as a pension credit. For a lifetime annuity that started before 6 April 2015, HMRC's Pensions Tax Manual says the amount "will have to reduce in order to comply with the order" once the annuitant is subject to a pension debit; for later annuities, the manual says income can fall in whatever circumstances the contract sets out. Either way, your income drops to reflect the share given up. On the receiving side, MoneyHelper says tax-free cash from a pension credit is usually an option, but not where the pension has already started paying an income, as an annuity in payment has. See pension sharing when the pension is already being paid and tax-free cash from a share.

Attachment. You keep the annuity, and an order adds a condition that your ex-partner gets an agreed share when it pays out. For an annuity, the Act names the provider of the annuity as the person responsible for it. In England, Wales and Northern Ireland an order can also cover death benefits. MoneyHelper says it typically ends on the ex-partner's remarriage, or on either person's death unless death benefits are covered. The differences are on sharing versus earmarking.

Offsetting. You keep the full pension and the other partner takes other assets of similar value. Comparing income that may last decades with a house or savings is hard; see pension offsetting.

Which route suits depends on how much of your income the annuity provides. An adviser can weigh that with you, and the call-back is free.

What happens to a joint life annuity when you divorce?

A joint life annuity pays you for life and then carries on paying a share to someone you named. L&G's key features describe the feature as paying an income to your spouse, registered civil partner or a financially dependent partner after you die. The detail is in joint life annuities explained.

Divorce does not automatically redirect the survivor income to someone new, and whether a former spouse still qualifies is for the contract to decide; wording differs. Under L&G's terms a named spouse "must still be your spouse when you die for them to receive an income", so a former spouse would not meet that test. Its other route is a named financial dependant, whom L&G must judge to be financially dependent on you when you die; that person will need to prove it.

The tax rules are more permissive than that. HMRC's manual says a person who was married to the member when the annuity was purchased may count as a dependant at death "whether still married to or in a civil partnership with that person at that time or not". That says what a contract may pay, not what yours does. If a contract names a former spouse, an adviser can talk the wording through, and the enquiry form is where you ask for that call.

Where the terms rule out changes once the annuity is set up, as Aviva's do, the person named at the start is what matters. If a pension sharing order has been made, the survivor position is also covered in survivor benefits after divorce, and how a lifetime annuity ends at death is on the annuity death benefit page.

Taking your share: annuity or something else?

A pension credit you receive is a retirement pot of your own. What to do with it is a separate decision: an annuity gives an income for life, drawdown keeps the money invested, and the choice depends on health, other income and how much risk you can accept. Investments can fall as well as rise, which is why that choice deserves care.

Two free routes come first. Pension Wise covers the choices for a defined contribution pot (what Pension Wise is), and MoneyHelper offers a free pensions and divorce appointment for impartial guidance on your options.

Annuities and divorce in Scotland

The Family Law (Scotland) Act 1985 uses the same kind of definition, covering an annuity or insurance policy bought to give effect to rights under an occupational or personal pension scheme. The difference is how much counts. MoneyHelper's example: if you have had your pension for 10 years and were married or in a civil partnership for five, only half the value will usually count. Attachment orders in Scotland can only cover lump sum payments and are called pension lump sum orders. See pensions on divorce in Scotland.

Annuity and divorce queries

Can I cash in my annuity to pay a divorce settlement?

Not under Aviva's key features, which say its annuity cannot be cashed in once set up. Another provider's terms may differ, so check the contract. A court can instead order sharing, attachment or offsetting as described above.

How do I find out what an annuity is worth for a divorce?

Ask the provider for a cash equivalent transfer value for divorce purposes. MoneyHelper says it can take up to three months and is valid in court for up to a year, and you might pay a fee if the pension is already paying out. The steps are in getting a pension valuation for divorce.

Can my ex claim part of my annuity income?

Not automatically, according to MoneyHelper, but pensions go into the calculations. If you cannot agree, the court can decide on a fair split.

Does an attachment order on an annuity stop if my ex remarries?

Typically yes, according to MoneyHelper, and it can also be changed if your ex moves in with someone else. A pension sharing order works differently: each of you owns a separate part, which MoneyHelper calls a clean break. Which suits you depends on your case; see what a pension sharing order is.

Annuity wording in divorce papers is hard going, and a short chat with an FCA-authorised adviser need not cost a penny; ask for it using this page's form.

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